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OMAN CEMENT COMPANY SAOG CONSOLIDATED AND PARENT COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2005

Registered office and principal place of business PO Box 560 Postal code 112 Sultanate of Oman

AUDITORS’ REPORT TO THE SHAREHOLDERS We have audited the accompanying balance sheet of Oman Cement Company SAOG (“the Parent Company”) and the consolidated financial statements of Oman Cement Company SAOG and its subsidiary, Sohar Praton Concrete Products Company SAOC (“the Group”) as at 31 December 2005 and the related statements of income and cash flows for the year then ended. The Parent Company’s and the Group’s financial statements, set out on pages 2 to 31, are the responsibility of the Parent Company's Board of Directors. Our responsibility is to express an opinion on the Parent Company’s and the Group’s financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the Parent Company’s and the Group’s financial statements present fairly, in all material respects, the financial position of the Parent Company and the Group as at 31 December 2005 and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. The Parent Company’s and the Group’s financial statements also comply in all material respects with the relevant requirements of the Commercial Companies Law of Oman, 1974 (as amended) and the relevant disclosure requirements for public joint stock companies issued by the Capital Market Authority. 19 February 2006

OMAN CEMENT COMPANY SAOG BALANCE SHEET at 31 December 2005

Note

Group 2005

Parent

Company 2005

Parent Company (restated)

2004 RO RO RO Non-current assets Property, plant and equipment 10 45,407,614 43,319,625 46,057,334 Investments available for sale 11 a) 11,591,755 11,591,755 6,488,359 Originated loans 12 10,449,792 10,449,792 11,601,400 Long term deposits 13 24,582,341 24,582,341 10,458,000 Investments in associates 14 a) 257,855 257,855 232,733 Investment in a subsidiary 15 -- 557,075 -- Employees loans and long term receivables 17 b) & c) 93,733 93,733 146,085 ----------------- ----------------- ----------------- Total non - current assets 92,383,090 90,852,176 74,983,911 ----------------- ----------------- ----------------- Current assets Investment in an associate 14 a) -- -- 187,418 Inventories 16 6,304,703 6,211,746 5,283,717 Accounts and other receivables 17 6,429,192 6,408,151 3,245,629 Investments available for sale 11 a) 44,992 44,992 47,739 Short term deposits 18 3,001,500 3,001,500 7,800,000 Bank balances and cash 1,058,406 1,044,945 1,097,225 ----------------- ----------------- -----------------

Total current assets 16,838,793 16,711,334 17,661,728 ----------------- ----------------- ----------------- Total assets 109,221,883 107,563,510 92,645,639 ========== ========== ========== SHAREHOLDERS’ FUNDS AND LIABILITIES Shareholders’ equity Share capital 19 33,087,271 33,087,271 33,087,271 Share premium 20 6,724,145 6,724,145 6,724,145 Legal reserve 21 11,029,090 11,029,090 11,029,090 Voluntary reserve 22 11,577,611 11,577,611 9,762,944 Fair value reserve 11 d) 4,728,650 4,728,650 996,912 Retained earnings 17,633,796 17,633,796 9,573,609 Proposed dividend 23 8,271,818 8,271,818 6,948,326 Minority interest 3 b) 406,515 -- -- ----------------- ----------------- ----------------- Total Shareholders’ equity 93,458,896 93,052,381 78,122,297 ----------------- ----------------- ----------------- Liabilities Non-current liabilities Deferred taxation 8 4,745,331 4,745,331 5,028,471 Term loans 24 2,190,705 1,500,000 1,800,000 Employees’ end of service benefits 5 b) 856,637 853,819 811,793 ----------------- ------------------ ----------------- Total non – current liabilities 7,792,673 7,099,150 7,640,264 ----------------- ------------------ ----------------- Current liabilities Term loans 24 589,586 300,000 877,650 Bank borrowings 56,220 -- -- Accounts and other payables 25 4,578,663 4,366,134 3,796,779 Taxation 8 b) 2,745,845 2,745,845 2,208,649 ----------------- ------------------ ----------------- Total current liabilities 7,970,314 7,411,979 6,883,078 ----------------- ------------------ ----------------- Total liabilities 15,762,987 14,511,129 14,523,342 ----------------- ----------------- ----------------- Total Shareholders’ funds and liabilities 109,221,883 107,563,510 92,645,639 ========== ========== ==========

Net assets per share 27 2.812 2.812 2.361 These financial statements on pages 2 to 31 were approved by the Board of Directors on 18 February 2006 and were signed on their behalf by: ………………………………………. ………………………..…………. Vice Chairman Director The attached notes 1 to 32 form part of these financial statements.

OMAN CEMENT COMPANY SAOG STATEMENT OF INCOME for the year ended 31 December 2005

Note Group 2005

Parent Company

2005

Parent Company

2004 (restated) RO RO ROINCOME Sales 3 c) 43,969,393 43,981,040 33,878,854Cost of sales 4 (23,340,418) (23,262,850) (18,337,199) ---------------- ---------------- ----------------Gross profit 20,628,975 20,718,190 15,541,655 EXPENSES General and administration 5 (1,981,003) (1,881,952) (1,727,835)Finance charges 6 (49,203) (18,535) (38,852) ---------------- --------------- ----------------Operating profit for the year 18,598,769 18,817,703 13,774,968 Interest, investment and other income 7 1,808,645 1,808,645 1,693,847 Share of results of associates 14 (240,296) (240,296) (146,652)Impairment loss in a associate 14 b) (41,353) (41,353) --Impairment loss in a subsidiary 15 -- (126,572) -- Reversal / (Provision) for corporate guarantee invoked by associate’s banker 391,250 391,250 (391,250) ---------------- ---------------- ----------------PROFIT BEFORE TAXATION 20,517,015 20,609,377 14,930,913 Taxation 8 (2,462,705) (2,462,705) (1,758,873) ---------------- ---------------- ---------------- PROFIT BEFORE MINORITY INTEREST 18,054,310 18,146,672 13,172,040 Share of loss of minority interest in the subsidiary 3 b) 92,362 -- -- ---------------- ---------------- ---------------- NET PROFIT FOR THE YEAR 18,146,672 18,146,672 13,172,040 ========= ========= ========= Earnings per share 9 0.548 0.548 0.398 ==== ==== ==== Dividend per share 23 0.250 0.250 0.210 ==== ==== ==== The attached notes 1 to 32 form part of these financial statements.

OMAN CEMENT COMPANY SAOG STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY for the year ended 31 December 2005

Group Share capital

Share premium

Legal reserve

Voluntary reserve

Fair value reserve

Retained earnings

Proposed dividend

Minority interest Total

(note 19) (note 20) (note 21) (note 22) [note 11 d)] (note 23) [note 3b)] RO RO RO RO RO RO RO RO RO At 31 December 2003 (as previously reported)

33,087,271

6,724,145

11,029,090

8,456,303

642,672

4,145,176

5,955,709

--

70,040,366

Effect of adoption of IAS 39 (revised) [refer note 3 f)]

--

--

--

--

(511,359)

511,359

--

--

--

---------------- -------------- --------------- -------------- --------------- --------------- -------------- -------------- --------------- At 31 December 2003 (restated) 33,087,271 6,724,145 11,029,090 8,456,303 131,313 4,656,535 5,955,709 -- 70,040,366 Net profit for the year (as previously reported)

--

--

--

--

--

13,066,406

--

--

13,066,406


--

--

--

--

(105,635)

105,635

--

--

--

Transfer to voluntary reserve -- -- -- 1,306,641 -- (1,306,641) -- -- -- Dividend for 2003 paid -- -- -- -- -- -- (5,955,709) -- (5,955,709) Proposed dividend for 2004 -- -- -- -- -- (6,948,326) 6,948,326 -- -- Fair value gains -- -- -- -- 971,234 -- -- -- 971,234 ---------------- -------------- --------------- -------------- --------------- --------------- -------------- --------------- --------------- At 31 December 2004 33,087,271 6,724,145 11,029,090 9,762,944 996,912 9,573,609 6,948,326 -- 78,122,297 ========= ======== ======== ======== ======== ======== ======== ======== ======== At 31 December 2004 (restated) 33,087,271 6,724,145 11,029,090 9,762,944 996,912 9,573,609 6,948,326 -- 78,122,297 Net profit for the year -- -- -- -- -- 18,146,672 -- -- 18,146,672 Share of minority interests -- -- -- -- -- -- -- 406,515 406,515 Transfer to voluntary reserve -- -- -- 1,814,667 -- (1,814,667) -- -- -- Dividend for 2004 paid -- -- -- -- -- -- (6,948,326) -- (6,948,326) Proposed dividend for 2005 -- -- -- -- -- (8,271,818) 8,271,818 -- -- Fair value gains -- -- -- -- 3,732,738 -- -- -- 3,732,738 Amounts reversed on disposal -- -- -- -- (1,000) -- -- -- (1,000) ---------------- -------------- --------------- -------------- --------------- ---------------- -------------- --------------- ---------------- At 31 December 2005 33,087,271 6,724,145 11,029,090 11,577,611 4,728,650 17,633,796 8,271,818 406,515 93,458,896 ========= ======== ======== ======== ======== ========= ======== ======== ========= The attached notes 1 to 32 form part of these financial statements.

OMAN CEMENT COMPANY SAOG STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED) for the year ended 31 December 2005

The attached notes 1 to 32 form part of these financial statements.

Parent Company Share capital

Share premium

Legal reserve

Voluntary reserve

Fair value reserve

Retained earnings

Proposed dividend Total

(note 19) (note 20) (note 21) (note 22) [note 11 d)] (note 23) RO RO RO RO RO RO RO RO At 31 December 2003 (as previously reported)

33,087,271

6,724,145

11,029,090

8,456,303

642,672

4,145,176

5,955,709

70,040,366


--

--

--

--

(511,359)

511,359

--

--

---------------- -------------- --------------- -------------- --------------- --------------- -------------- --------------- At 31 December 2003 (restated) 33,087,271 6,724,145 11,029,090 8,456,303 131,313 4,656,535 5,955,709 70,040,366 Net profit for the year (as previously reported)

--

--

--

--

--

13,066,406

--

13,066,406


--

--

--

--

(105,635)

105,635

--

--

Transfer to voluntary reserve -- -- -- 1,306,641 -- (1,306,641) -- -- Dividend for 2003 paid -- -- -- -- -- -- (5,955,709) (5,955,709) Proposed dividend for 2004 -- -- -- -- -- (6,948,326) 6,948,326 -- Fair value gains -- -- -- -- 971,234 -- -- 971,234 ---------------- -------------- --------------- -------------- --------------- --------------- -------------- ---------------- At 31 December 2004 33,087,271 6,724,145 11,029,090 9,762,944 996,912 9,573,609 6,948,326 78,122,297 ========= ======== ======== ======== ======== ======== ======== ========= At 31 December 2004 (restated) 33,087,271 6,724,145 11,029,090 9,762,944 996,912 9,573,609 6,948,326 78,122,297 Net profit for the year -- -- -- -- -- 18,146,672 -- 18,146,672 Transfer to voluntary reserve -- -- -- 1,814,667 -- (1,814,667) -- -- Dividend for 2004 paid -- -- -- -- -- -- (6,948,326) (6,948,326) Proposed dividend for 2005 -- -- -- -- -- (8,271,818) 8,271,818 -- Fair value gains -- -- -- -- 3,732,738 -- -- 3,732,738 Amounts reversed on disposal -- -- -- -- (1,000) -- -- (1,000) ---------------- -------------- ---------------- -------------- -------------- ---------------- -------------- ---------------- At 31 December 2005 33,087,271 6,724,145 11,029,090 11,577,611 4,728,650 17,633,796 8,271,818 93,052,381 ========= ======== ========= ======== ======== ========= ======== =========

OMAN CEMENT COMPANY SAOG CASH FLOW STATEMENT for the year ended 31 December 2005

Group 2005

Parent Company 2005

Parent Company 2004

Note RO RO RO CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 26 21,002,416 21,267,781 16,205,469 Income tax paid (2,208,649) (2,208,649) (723,305) Directors’ remuneration paid (77,500) (77,500) (50,000) Employees’ end of service benefits paid (40,746) (40,746) (52,590) ---------------- ---------------- ---------------- Net cash from operating activities 18,675,521 18,940,886 15,379,574 ---------------- ---------------- ---------------- CASH FLOWS USED IN INVESTING ACTIVITIES

Interest income and commission received 929,905 929,905 756,460 Proceeds from disposal of plant and equipment -- -- 4,457 Proceeds on maturity of originated loans 4,270,000 4,270,000 2,850,000 Proceeds from disposal of investment available for sale

107,500

107,500

--

Proceeds on maturity of long term deposits 4,000,000 4,000,000 -- Dividend received 459,555 459,555 460,551 Compensation for plant and equipment -- -- 308,080 Purchase of plant and equipment (709,091) (707,697) (464,428) Advance for purchase of plant and equipment (1,491,166) (1,491,166) -- Short term deposits (3,001,500) (3,001,500) (7,800,000) Long term deposits (18,124,341) (18,124,341) (4,558,000) Purchase of originated loans (3,117,000) (3,117,000) (2,814,694) Purchase of investments available for sale (1,470,911) (1,470,911) (646,077) Proceeds from recall of short term deposits 7,800,000 7,800,000 4,493,180 Investment in associates (78,000) (78,000) Investment in subsidiary -- (725,000) (234,000) ---------------- ---------------- ---------------- Net cash used in investing activities (10,425,049) (11,148,655) (7,644,471) ---------------- ---------------- ---------------- CASH FLOWS USED IN FINANCING ACTIVITIES

Interest paid (18,535) (18,535) (41,757) Term loan repayments (1,125,289) (877,650) (1,455,300) Dividends paid (6,948,326) (6,948,326) (5,955,709) Rights issue of shares 75,000 -- -- ---------------- ---------------- ---------------- Net cash used in financing activities (8,017,150) (7,844,511) (7,452,766) ---------------- ---------------- ---------------- (Decrease) / increase in cash and cash equivalents during the year

233,322

(52,280)

282,337

Cash and cash equivalents at beginning of the period / year

768,864

1,097,225

814,888

---------------- ---------------- ---------------- Cash and cash equivalents at end of the year [note 3 l)]

1,002,186

1,044,945

1,097,225

========= ========= ========= Cash and cash equivalents at end of the year comprise:

Bank balances and cash 1,058,406 1,044,945 1,097,225 Bank borrowings (56,220) -- --

---------------- -------------- -------------- 1,002,186 1,044,945 1,097,225 ========= ======== ======== The attached notes 1 to 32 form part of these financial statements.

OMAN CEMENT COMPANY SAOG NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005 1 ACTIVITIES Oman Cement Company SAOG (the Parent Company”) is a joint stock company registered in the

Sultanate of Oman and is engaged in the manufacture and sale of cement and related products. Sohar Praton Concrete Products Company SAOC (“the Subsidiary”), a 57.8% subsidiary, is a closely

held joint stock Company registered in the Sultanate of Oman and is engaged in the manufacturing and marketing precast ready mixed concrete products. The Company’s principal place of business is Sohar and its registered office address is P O Box 375, Al Seeb, Postal Code 111, Sultanate of Oman.

During the year, the Board of Directors of Sohar Praton Concrete Products Company SAOC (“the

Subsidiary”) approved a plan of restructuring by absorbing accumulated losses and reducing the share capital by RO 800,000 and subsequently issuing further capital under a rights issue. Consequently Oman Cement Company SAOG (the Parent Company”) invested an additional amount of RO 725,000 increasing their shareholding to 57.8 %.

Until 7 August 2005, the Parent Company held 25% of the Shareholding in Sohar Praton Concrete

Products Company SAOC and had accounted the investment as investment in an associate. Accordingly the share of results upto 7 August 2005 is shown under ‘share of results of associates’ in the consolidated financial statements. Following the increase in the shareholding to 57.8%, the investment is now accounted as an investment in a subsidiary. Accordingly in the consolidated financial statements, the results of operations of the subsidiary from 8 August 2005 to 31 December 2005 and the financial position of the subsidiary at 31 December 2005 have been consolidated with that of the Parent Company.

2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS OF SUBSIDIARY

At the balance sheet date, the accumulated losses of the subsidiary company, Sohar Praton Concrete Products Company SAOC, amounted to 637,983 (2004 – RO 927,752) and the net current liabilities of the subsidiary exceeded current assets by RO 430,876 (2004 – RO 612,649). However the financial statements of the subsidiary company are prepared on a going concern basis, on the assumption that the shareholders of the subsidiary company would provide adequate financial support to meet financial obligations of the subsidiary company as they arise.

3 SIGNIFICANT ACCOUNTING POLICIES Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, interpretations issued by the International Financial Reporting Interpretations Committee and the requirements of the Commercial Companies Law of the Sultanate of Oman. In the current year, the Parent Company and the Group has adopted all applicable new and revised Standards and Interpretations issued by the IASB and the IFRIC that are effective for accounting periods beginning on or after 1 January 2005.

The following accounting policies have been consistently applied in dealing with items considered

material to the Parent Company and the Group financial statements.

a) Accounting convention

The financial statements have been prepared under the historical cost convention as amended by the fair value accounting of government term loan and deferred income and investments available for sale.

OMAN CEMENT COMPANY SAOG

NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Parent Company and its subsidiary collectively (“the Group”). All significant intra-group transactions, profits and balances are eliminated on consolidation and all sales and profit figures relate to external transactions and balances only.

A subsidiary is a company in which the Company owns more than one half of the voting power or exercises control over its financial and operating policies so as to obtain benefits from its activities.

Minority interests, if any, in the equity and results of a subsidiary are shown as separate items in the consolidated financial statements.

c) Sales Sales consist of the invoiced value of goods supplied during the year, net of discounts. Revenue

is recognised from the sale of goods when significant risks and rewards of ownership have been transferred to the buyer.

d) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. The cost of

property, plant and equipment is their purchase price together with any incidental expenses. The cost of property, plant and equipment is depreciated in equal installments over the estimated useful lives of assets. The estimated useful lives of the assets for the calculation of depreciation are: Parent Company Subsidiary Company Years Years Land and quarry development 5 --Plant, machinery and equipment 5 – 25 6 – 20Factory civil works 37 - 40 40Roadways 37 --Housing complex 25 --Earth moving and transport equipment 4 – 5 --Furniture, fixtures and other equipment 3 – 10 3 – 5Communication facilities 10 --

Capital work in progress includes all costs incurred towards construction and is certified by consultants in respect to project expansion. Capital work in progress is not depreciated.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is

written down to its recoverable amount. Gains or losses on disposal of assets are determined by reference to their carrying amount and

are taken into account in determining the net profit for the year.

e) Maintenance expenditure Maintenance expenditure on plant and machinery is charged to the statement of income in the

year in which its incurred.

OMAN CEMENT COMPANY SAOG NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005


f) Investments

Investments are classified as per IAS 39: Financial Instruments – Recognition and

Measurement, into the following categories: originated loans and available for sale. All purchases and sales of investments are recognised on the trade date, which is the date the

Group commits to purchase or sell the investment. Cost of purchases includes the transaction costs.

Carrying values

Originated loans Originated loans are initially recognised at cost and subsequently re-measured at amortised cost

using the effective yield method less any provision for impairment. The amount of impairment loss for investments carried at amortised cost is calculated as the difference between the investment’s carrying amount and the present value of expected future cash flows discounted at the effective interest rate.

The originated loans and long term deposits are always treated as non-current as per the

Group’s policy of initial recognition based on the period for which they are placed at the date of placement, which is always more than a year.

Available for sale

Investments which are intended to be held for an indefinite period of time but which may be sold in response to needs for liquidity, are classified as available for sale. These are included under non-current assets.

Available for sale investments are initially recognised at cost and subsequently carried at fair

value. Unrealised gains and losses arising from changes in the fair value of available for sale investments are recognized as a fair value reserve in Shareholders’ equity in the period in which they arise. However, an impairment in value is taken to fair value reserve to the extent of any previous surplus included in the fair value reserve. Conversely increases in fair value subsequent to an impairment being recognised are taken to the statement of income where they can be objectively related to an event occurring after the loss was recognised in that account.

Until the previous year certain fair value changes were taken to statement of income. These

represented reversals of adjustments that had occurred prior to the year 2001, when the policy had been to recognise fair value adjustments in the statement of income. Pursuant to the amendments in IAS 39 ‘Financial Instruments: Recognition and Measurement’ applicable for annual periods beginning on or after 1 January 2005, all the resultant gains or losses on fair value changes of available for sale investments are recognised as fair value reserve in the statement of changes in equity. As a result the cumulative amounts not yet reversed in the statement of income amounting to RO 511,359 at 31 December 2003 has been restated and transferred to the retained earnings as at that date.

For investments actively traded in organised financial markets, fair value is generally determined by reference to stock exchange quoted market bid prices at the close of business on the balance sheet date, and the remeasurement to fair value of such investments is determined on an aggregate portfolio basis. Associate companies

A company is an associate if the investor company has significant influence over the investee company, through the power to participate in, but not control, the financial and operating policy decisions of the investee company.



f) Investments (Continued)

Associate companies (continued) Investments in associates are accounted for by the equity method of accounting. Equity

accounting involves recognizing in the statement of income, the Company’s share of the associates’ profit or loss for the year. The Company’s interest in the associates is carried in the balance sheet at an amount that reflects its share of the net asset of the associates.

Subsidiary companies

An entity over which the Company owes more than half of voting power or exercises control is classified as subsidiary. The results of subsidiary companies acquired or disposed during the year are included in the Parent Company and the Group’s financial statements from the date of their acquisition or upto the date of their disposal. Income from investment activities

Dividend income from investments is accounted upon receipt of entitlement notification. Interest receivable from certificates of deposit and loan notes is accounted on an accrual basis.

g) Inventories

Inventories are valued at the lower of cost and net realizable value. Cost of raw materials, packing materials, stores, spares and consumables is the weighted average cost of purchase, and for partly processed material and finished products includes the cost of all direct expenditure and an appropriate proportion of production overheads. Net realisable value is the estimated selling price of finished products less costs incurred in selling and distribution and, in the case of partly processed material, the further costs to completion of processing. No value is attributed to limestone quarried prior to the commencement of processing.

h) Accounts receivable

Accounts receivable originated by the Group are measured at cost. Bad debts are written off or

provided for as they arise and provision is made for doubtful receivables.

i) Accounts payable and accruals Liabilities are recognised for amounts to be paid for goods and service received, whether or not billed to the Company.

j) Employee end of service benefits

Payment is made to Omani Government’s Social Security Scheme under Royal Decree Number 72/91 for Omani employees. Provision is made for amounts payable under the Sultanate of Oman’s labour law applicable to expatriate employees’ accumulated periods of service at the balance sheet date.

k) Foreign currency transactions

Foreign currency transactions are translated into Omani Rials at the exchange rate prevailing on

the transaction date. Foreign currency monetary assets and liabilities are translated into Rials Omani at the exchange rate prevailing at the balance sheet date. Exchange differences arising are taken to the statement of income.

l) Cash and cash equivalents

For purpose of cash flow statements, cash and cash equivalents consist of cash and bank

balances with an original maturity of three months, net of temporary bank borrowings.


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005


m) Taxation

Taxation is provided for in accordance with the Sultanate of Oman’s fiscal regulations. Deferred taxation is provided using the liability method on all temporary differences at the reporting date.

It is calculated at the effective tax rate considered applicable to the year when it is anticipated the liabilities will be settled, and it is based on the rates (and laws) that have been enacted at the balance sheet date. The principal temporary differences arise from depreciation on property, plant and equipment and provisions for slow moving and obsolete inventories.

n) Provisions

A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

o) Government soft loan and deferred income

Carrying values The carrying value of the interest free Government term loan [note 24 e)] are determined as the

present value of the loan adopting the interest rates that reflect the current cost of similar borrowing on similar loan terms from a commercial bank. The reported balance of Government term loan comprise their carrying value plus a component of unamortised deferred income that represents the difference between the carrying value and the present value of the loan adopting the interest rates that the loan attracts.

Finance charge The effective interest charge arises as a result of accounting for the fair value of the Government

term loan and therefore represents the actual interest incurred for the year plus an amount arising from movements in the carrying value of the loan in the year.

Deferred income The amount of deferred income relating to the Government term loan is released to the statement of income in such a way as to spread the income over the effective interest charge to which it relates.

p) Financial liabilities

All financial liabilities are initially measured at cost and are subsequently measured at amortised

cost.

q) Leases

The operating lease payments are charged to the statement of income.

r) Estimates and judgements

In preparing the financial statements, the Board of Directors is required to make estimates and assumptions which affect reported income and expenses, assets, liabilities and related disclosures. The use of available information and application of judgement based on historical experience and other factors are inherent in the formation of estimates. Actual results in the future could differ from such estimates.



4 COST OF SALES

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Opening inventories at the beginning of the year Partly processed cement 63,091 63,091 63,196Finished clinker 1,208,582 1,208,582 1,047,347Finished cement 363,096 363,096 105,236 -------------- -------------- -------------- 1,634,769 1,634,769 1,215,779 Cost of production: Imported clinker 3,115,964 3,115,964 3,882,556Imported cement 4,609,360 4,609,360 637,958Materials and stores, spares and consumables 3,446,246 3,442,619 2,354,198Energy and water 4,746,708 4,746,708 4,754,251Salaries and employee related costs [note 5 a)] 1,987,068 1,983,543 1,894,683Depreciation [note 10 c)] 3,155,573 3,108,907 3,014,758Other direct costs 1,751,201 1,727,451 1,693,343(Decrease) / increase in provision for stores, spares and consumables

(86,547)

(86,547)

524,442

-------------- --------------- --------------- 24,360,342 24,282,774 19,971,968

Closing inventories at the end of the year Partly processed clinker (62,041) (62,041) (63,091)Finished clinker (728,149) (728,149) (1,208,582)Finished cement (229,734) (229,734) (363,096)

---------------- ---------------- ---------------- 23,340,418 23,262,850 18,337,199 ========= ========= =========

5 GENERAL AND ADMINISTRATION EXPENSES

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Salaries and employee related costs [note 5 a)] 859,160 817,086 785,625Depreciation [note 10 c)] 362,038 354,799 342,047Communications 38,224 38,224 35,363Insurance 125,517 125,517 123,024Training costs and levy 98,000 98,000 83,671Land lease rentals [note 10 b)] 65,000 65,000 65,000Share registration charges 33,187 33,187 33,087Advertising expenses 36,242 36,242 32,022Professional fees 48,353 48,353 24,952Printing and stationery 22,486 22,486 19,092Miscellaneous 292,796 243,058 183,952

-------------- -------------- -------------- 1,981,003 1,881,952 1,727,835 ======== ======== ========



5 GENERAL AND ADMINISTRATION EXPENSES (Continued)

The following further notes apply: a) Salaries and employee related costs under cost of sales and general and administration

expenses include the following:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Salaries, wages and allowances 2,636,915 2,595,286 2,434,769Contributions to defined contributions retirement plan for Omani employees

74,345

74,345

66,273

Cost of end of service benefits for expatriate employees

86,742

82,772

89,574

Other costs 48,226 48,226 89,692 -------------- -------------- -------------- 2,846,228 2,800,629 2,680,308 ======== ======== ======== Allocated between:

Cost of sales (note 4) 1,987,068 1,983,543 1,894,683General and administration (note 5) 859,160 817,086 785,625 -------------- -------------- -------------- 2,846,228 2,800,629 2,680,308 ======== ======== ========

b) Movements in expatriate employees’ end of service benefits liability recognised in the balance

sheet are as follows:-

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

At the beginning of the year 819,472 811,793 774,809Expenses recognised in the statement of income 86,742 82,772 89,574End of service benefits paid during the year (49,577) (40,746) (52,590) -------------- -------------- --------------At the end of the year 856,637 853,819 811,793

======== ======== ========

6 FINANCE CHARGES Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

The interest charge for the year comprises: Effective interest charge adopting the principle of accounting for fair values as described in note 3 o) to the financial statements / actual interest rate

149,686 119,018

150,628

Less: Release of deferred income (100,483) (100,483) (111,776) ------------- ------------- -------------- 49,203 18,535 38,852 ======= ======= ========



7 INTEREST, INVESTMENT AND OTHER INCOME

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Bank interest 875,209 875,209 745,028Interest on Government Development Bonds and other bonds

304,639

304,639

177,147

Dividend income 459,555 459,555 460,551Profit on disposal of plant and equipment -- -- 164,206Rental income 13,077 13,077 14,180Other income 150,665 150,665 132,735Realised gain on disposal of investment available for sale

5,500

5,500

--

-------------- -------------- -------------- 1,808,645 1,808,645 1,693,847 ======== ======== ========

8 TAXATION

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Income statement: Current taxation: Current year 2,745,845 2,745,845 2,231,480

Prior years -- -- 8,431

Deferred taxation: Current year [see note e) below] (283,140) (283,140) (481,038)

-------------- -------------- -------------- 2,462,705 2,462,705 1,758,873 ======== ======== ========

Balance sheet Current liability Taxation [see note b) below] 2,745,845 2,745,845 2,208,649 ======== ======== ========Non-current liability

Deferred taxation [see note e) below] 4,745,331 4,745,331 5,028,471 ======== ======== ========

The following further notes apply:

a) Taxation has been provided at rates applicable to a wholly Omani owned company. b) Current liability for taxation comprises of the following:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Current year taxation 2,745,845 2,745,845 2,231,480Less : Income tax recoverable -- -- (22,831) -------------- -------------- -------------- 2,745,845 2,745,845 2,208,649 ======== ======== ========


8 TAXATION (Continued)

c) During the year, The Secretariat General for Taxation completed the assessments of the Parent Company for the years 2000 to 2002 and had disallowed provisions relating to land rent. Although no additional tax liability have been assessed, the Parent Company filed an objection which was rejected by The Secretary General of Taxation. The Parent Company has subsequently filed an appeal to The Taxation Committee; appeal has not yet being heard.

d) The taxation assessments of the Parent Company for the years 2003 and 2004 and the

subsidiary for the years upto 2004 have not been finalised by the Secretariat General of Taxation. The Boards of Directors however believe that, any additional tax liability likely to arise on the completion of the pending assessments would not be material to the financial position of the Group at the balance sheet date.

e) Deferred tax liabilities and assets and the deferred tax charge / (credit) in the statement of

income are attributable to the following items:

Parent Company

31 December 2004

Charged / (credited) to statement of

income

31 December 2005

RO RO RO Deferred tax liabilities / (assets)

Accelerated tax depreciation 5,295,765 (344,445) 4,951,320Provisions (220,344) 14,355 (205,989)

Provision for corporate guarantee (46,950) 46,950 -- -------------- -------------- --------------

Net deferred tax liability 5,028,471 (283,140) 4,745,331 ======== ======== ========

The Board of Directors of the Subsidiary has decided not to account for the deferred tax asset arising mainly from carry forward losses until consistent future profitability is demonstrated.

f) The reconciliation of taxation charge on the accounting profit for the year and the taxation charge in the financial statements at 12% is as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Tax charge on accounting profit after considering basic exemption of RO 30,000 2,469,526 2,469,526 1,788,110Add / (less) – Tax effect of: Dividend income (55,147) (55,147) (55,266)Realised gain on disposal of investment listed on MSM

(660)

(660)

--

Share of results in associates and impairment loss in a subsidiary

48,986

48,986

17,598

Prior year taxation -- -- 8,431 -------------- -------------- --------------

2,462,705 2,462,705 1,758,873 ======== ======== ========



9 EARNINGS PER SHARE

The earnings per share has been derived by dividing the net profit for the year of RO 18,146,672 (2004 – RO 13,172,040) attributable to shareholders of the Parent Company by the number of shares outstanding of 33,087,271 (2004 – 33,087,271). As there are no dilutive potential shares, the diluted earnings per share is identical to the basic earnings per share.

10 PROPERTY, PLANT AND EQUIPMENT

a) The balances and movements of property, plant and equipment are set out on pages 30 and 31. b) The land on which the Parent Company operates is leased from Ministry of Housing, Electricity

and Water. Commitment in respect of annual lease payments amounts to RO 65,000 (2004 – RO 65,000). The lease is renewable annually.

c) The depreciation charge for the year is allocated as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Cost of sales (note 4) 3,155,573 3,108,907 3,014,758General and administration (note 5) 362,038 354,799 342,047Charge relating to the period from 1 January 2005 to 7 August 2005 (note 1)

75,263

--

--

-------------- -------------- -------------- 3,592,874 3,463,706 3,356,805 ======== ======== ========

d) The capital work in progress largely relates to the expenses incurred in relation to the Parent

Company’s installation of another grinding mill as part of expansion. e) The property, plant and equipment of the subsidiary Company are mortgaged as security

against the term loan and the Government soft loan [refer note 24 c) and d)].

11 INVESTMENTS AVAILABLE FOR SALE Group 2005

Parent Company

2005

Parent Company

2004 RO RO ROInvestments classified as available for sale Cost at the beginning of the year 5,539,186 5,539,186 4,893,109Additions during the year 1,470,911 1,470,911 646,077Disposals during the year (102,000) (102,000) -- -------------- -------------- --------------Cost at the end of the year 6,908,097 6,908,097 5,539,186Cumulative fair value adjustments [see note 11 d)] 4,728,650 4,728,650 996,912 -------------- -------------- --------------Carrying value 11,636,747 11,636,747 6,536,098 ======== ======== ========


11 INVESTMENTS AVAILABLE FOR SALE (Continued)


a) Investments available for sale are classified as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Non-current assets 11,591,755 11,591,755 6,488,359Current assets 44,992 44,992 47,739 ---------------- ---------------- -------------- 11,636,747 11,636,747 6,536,098 ========= ========= ========

b) Investments available for sale are analysed as follows: Market value Cost

Parent Company and Group 2005 2004 2005 2004 RO RO RO RO Marketable investments - local

Banking 4,223,804 2,624,277 2,231,143 1,651,033Investment 2,150,835 1,272,101 1,709,709 1,425,242Industrial 2,117,707 927,468 710,710 544,660Services 2,994,401 1,562,252 2,106,535 1,768,251

-------------- -------------- -------------- -------------- 11,486,747 6,386,098 6,758,097 5,389,186 Unquoted investments - local 150,000 150,000 150,000 150,000 ---------------- -------------- -------------- -------------- Total 11,636,747 6,536,098 6,908,097 5,539,186 ========= ======== ======== ======== c) Unquoted investment comprise RO 150,000 (2004 – RO 150,000) invested in The Fund for the

Development of Youth Projects. Although no market prices are available for the unquoted investment, the carrying value is considered to be the fair value at the balance sheet date and no impairment in its value is considered to have occurred.

d) Movements in the fair value adjustments during the year comprise:

Group 2005

Parent Company

2005

Parent Company

2004 (restated) RO RO RO At the beginning of the year 996,912 996,912 131,313Effect of adoption of IAS 39 (revised) [refer note 3 f)] -- -- (105,635)Credited to fair value reserve 3,732,738 3,732,738 971,234Amount reversed on disposal (1,000) (1,000) -- -------------- -------------- -------------At the end of the year 4,728,650 4,728,650 996,912

======== ======== =======


11 INVESTMENTS AVAILABLE FOR SALE (Continued)

e) Details of the investments in which the market value exceeds 10% of the market value of the

Group’s overall investment portfolio in marketable investments as at the balance sheet are as follows:

Parent Company and Group

Percentage of the overall

portfolio

Number of securities

Market

value

Cost % RO RO

Oman International Bank SAOG 24.6% 644,118 2,866,325 1,555,630

Shell Oman Marketing SAOG 17.7% 238,839 2,054,015 1,558,744 Raysut Cement Company SAOG 17.1% 221,400 1,988,172 508,102

Ominvest SAOG 11.3% 220,307 1,310,827 945,105 f) The geographical distribution of investments available for sale (at cost) are as follows:

2005 2004

Parent Company and Group RO RO Sultanate of Oman 6,908,097 5,539,186 ======== ========

g) At the balance sheet date none of the Group’s investment holdings represent 10% or more of

the investee company’s share capital (2004 – Nil). 12 ORIGINATED LOANS Group and Parent

Company 2005

Parent Company

2004 RO RO Certificates of deposit with commercial banks 3.65% - 3.90% 4,617,000 5,270,000Government development bonds 4% - 5.25% 5,158,546 5,657,154Loan notes of a commercial bank Bonds of a commercial bank

10% 7%

47,981 194,300

47,981194,300

Bonds of a public listed Company Libor + 2% 431,965 431,965 ---------------- ---------------- 10,449,792 11,601,400 ========= =========


a) The maturity profile of the originated loans at the balance sheet date is as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Within one year 4,664,981 4,664,981 4,270,000More than one year and less than five years

5,590,511

5,590,511

4,137,100

More than five years 194,300 194,300 3,194,300 ---------------- ---------------- ---------------- 10,449,792 10,449,792 11,601,400 ========= ========= =========

b) Government development bonds amounting to RO 650,000 (2004 – RO 650,000) are pledged in

favour of a local commercial bank providing banking facilities.


13 LONG TERM DEPOSITS

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Long term deposits 24,582,341 24,582,341 10,458,000

========= ========= =========

Long term deposits are placed with commercial banks at an interest rate range of 3.250 % to 4.7% per annum (2004 –3.250% to 4% per annum) and have a maturity period of three years or less from the date of placement. RO 19,986,841 of the deposits are due for maturity during the year 2006 and the remaining deposits will mature during the year 2007.

14 INVESTMENTS IN ASSOCIATES

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO At the beginning of the year 420,151 420,151 332,803Additional investments during the year 78,000 78,000 234,000Share of results [see note b) below] (240,296) (240,296) (146,652) -------------- -------------- --------------At the end of the year 257,855 257,855 420,151

======== ======== ======== The following further notes apply:

a) Investments in associates are classified as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Non-current assets 257,855 257,855 232,733 Current assets -- -- 187,418 ------------- ------------- ------------- 257,855 257,855 420,151 ======= ======= =======

b) Following the Parent Company’s Board of Directors decision to increase its Shareholding in

Sohar Praton Concrete Products SAOC from 25% to 57.8%, the investment is now treated as an investment in a subsidiary. The Parent Company’s share of results of Sohar Praton Concrete Products SAOC for the period 1 January 2005 to 7 August 2005 amounted to RO 228,771; out of which RO 187,418 is included in share of results above and the balance amount of RO 41,353 as an impairment loss.

OMAN CEMENT COMPANY SAOG NOTES TO THE FINANCIAL STATEMENTS (Continued) for the year ended 31 December 2005 14 INVESTMENTS IN ASSOCIATES (Continued)

c) The percentage shareholding of the Parent Company in associates, all of which are registered in the Sultanate of Oman and represent 10% or more of the issuer’s share capital as at the balance sheet date are as follows:

Parent Company and Group

Shareholding

Number of Securities

Book value

Cost

2005 2004 2005 2004 2005 2004 2005 2004 % % RO RO RO RO

Al Batinah Quarries Company LLC (engaged in quarrying activities)

20

20

50,000

50,000

34,295

38,033 50,000 50,000

Sohar Praton Concrete Products SAOC (engaged in the manufacture of concrete blocks)

--

25

--

400,000

--

187,418

-- 400,000

Oman Frantschach Industrial Packaging LLC (engaged in manufacture of industrial paper bags)

39

39

312,000

234,000

223,560

194,700 312,000 234,000

------------ ------------ ------------ ------------ ------------ ------------Total 362,000 684,000 257,855 420,151 362,000 684,000

======= ======= ======= ======= ======= ======= d) The results of associates are summarised as follows:

Parent Company and Group Assets Liabilities Revenue (Loss) 2005 2004 2005 2004 2005 2004 2005 2004 RO RO RO RO RO RO RO RO

Oman Frantschach Industrial Packaging LLC 1,589,986 1,128,057 885,499 625,637 1,406,810 --

(126,000)

(100,769)

Al Batinah Quarries Company LLC

172,460

194,584

541

3,338

3,672

2,900

(19,326)

(25,149)


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 15 INVESTMENT IN A SUBSIDIARY

The investment in a subsidiary effective from 8 August 2005 in which Oman Cement Company SAOG holds 57.8% shareholding is as follows:

a) The cost comprises the carrying amount of original investment as an associate plus the

additional amount paid for the additional share purchased on 8 August 2005 (see note 1).

b) Investment in subsidiary is set off against the shareholder’s equity of the subsidiary in the Group financial statements.

16 INVENTORIES

Group2005

Parent Company

2005

Parent Company

2004 RO RO RO

Stores, spares and consumables 5,351,078 5,351,078 5,189,588Raw materials 1,500,179 1,496,326 126,683Finished clinker 728,149 728,149 1,208,582Partly processed clinker 70,316 62,041 63,091Finished cement 310,563 229,734 363,096Packing materials 40,640 40,640 130,371Materials in transit 19,776 19,776 37,928 ---------------- ---------------- --------------- 8,020,701 7,927,744 7,119,339Less: Provision for stores, spares and consumables [see note b) below]

(1,715,998)

(1,715,998)

(1,835,622)

---------------- ---------------- ---------------- 6,304,703 6,211,746 5,283,717 ========= ========= =========

Sohar Praton Concrete Products SAOC (engaged in the manufacture of concrete blocks)

Parent Company

2005 RO Cost 725,000 Impairment loss recognised during the period as an associate [note 14 b)]

(41,353)

Losses recognised during the year (an amount equivalent to the Parent’s share of the losses for the period from 8 August 2005 to 31 December 2005)

(126,572) --------------Carrying value at 31 December 2005 557,075 ========


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 16 INVENTORIES (Continued)

The following further notes apply: a) Finished goods of the Parent company at the balance sheet date represent 2 days sales (2004 –

4 days).

b) Movement in the provision for stores, spares and consumables is as follows:

Group2005

Parent Company

2005

Parent Company

2004 RO RO RO

At the beginning of the year 1,835,622 1,835,622 1,323,033 Provided during the year -- -- 524,442 Released to the statement of income during the year

(86,547)

(86,547)

--

Written off during the year (33,077) (33,077) (11,853) -------------- -------------- -------------- At the end of the year 1,715,998 1,715,998 1,835,622

======== ======== ========

17 ACCOUNTS AND OTHER RECEIVABLES Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Accounts receivable 3,964,107 3,959,994 2,704,561Receivable from subsidiary -- 13,035 7,747Receivable from associate -- -- 631Interest receivable 676,703 676,703 426,760Advances to suppliers 99,870 96,868 46,353Advances to contractors 1,491,166 1,491,166 --Employee loans [see note b) below] 11,297 11,297 14,647Other receivables 154,049 127,088 12,930Receivable from contractor [see note c) below] 32,000 32,000 32,000 -------------- -------------- --------------

6,429,192 6,408,151 3,245,629 ======== ======== ========

The following further notes apply: a) Accounts receivable of the Parent Company are individually covered by bank guarantees and

letters of credit. b) Employee loans represent loans given to the Parent Company’s employees during 2003 to

enable them to purchase the Parent Company’s shares, are interest-free and repayable in monthly instalments. The instalments receivable within a year of the balance sheet date are shown as current assets and the remaining amount is classified as non – current assets. The loans are secured by a lien on the related shares with the Muscat Depository and Securities Registration Company SAOC in favour of the Company.

c) Receivable from contractor relates to a sale of bulldozers which is to be received in 60 equal

monthly instalments. The amounts receivable within a year of the balance sheet date are shown as current assets and the remaining amount is classified as non – current assets.



18 SHORT TERM DEPOSITS

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Short term deposits 3,001,500 3,001,500 7,800,000

======== ======== ======== Short-term deposits are placed with commercial banks at interest rates ranging from 4.4% to 4.45% per annum (2004 – 2% to 2.4% per annum) and have maturity periods more than three months but less than a year at the date of placement.

19 SHARE CAPITAL

2005 2004The share capital of the Parent Company comprise: RO RO

Authorised (shares of RO 1 each) 36,000,000 36,000,000 ========= ========= Issued and fully paid (shares of RO 1 each) 33,087,271 33,087,271 ========= =========

Shareholders of the Parent Company who own 10% or more of the Parent Company’s shares, whether in their name or through a nominee account, and the number of shares they hold are as follows:

2005 2004 Number of

shares

ValueNumber of

shares Value

ROShareholders RO RO Ministry of Commerce and Industry

10,066,973

10,066,973

10,066,973

10,066,973

Ministry of Finance 6,807,044 6,807,044 6,807,044 6,807,044 ---------------- ---------------- ---------------- ---------------- 16,874,017 16,874,017 16,874,017 16,874,017 ========= ========= ========= =========

20 SHARE PREMIUM ACCOUNT

In 1994, the Parent Company made an offering of shares to the public at a premium. As a result of the offering, a share premium account with an amount of RO 10,757,254 was established. During the year 2001, an amount of RO 4,033,109 was transferred from this account to legal reserve.

21 LEGAL RESERVE Article 106 of the Commercial Companies Law of Sultanate of Oman requires that 10% of the

reported profit for the year be transferred to the legal reserve. The Parent Company may resolve to discontinue such transfers when the reserve equals one third of its share capital. The reserve is not available for distribution. There is no transfer to the legal reserve during the year as it already equals one third of the Parent Company’s share capital.


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 22 VOLUNTARY RESERVE

In accordance with the Articles of Association of the Parent Company, annual appropriations not exceeding 20% of the profit for the year after deduction of legal reserve may be made to this reserve. The accumulated balance of the reserve may not exceed half the value of the Company’s paid-up share capital.

The Board of Directors of the Parent Company has recommended an appropriation of RO 1,814,667 at 10% (2004 – RO 1,306,461 at 10%) of the net profit for the year after taxation to the voluntary reserve. The appropriation is subject to the Annual General Meeting’s approval.

23 PROPOSED DIVIDEND

a) A dividend in respect of 2005 of RO 0.250 per share (2004 – RO 0.210 per share) amounting to a total of RO 8,271,818 (2004 – RO 6,948,326) is proposed by the Board of Directors. The dividend is subject to the Annual General Meeting’s approval.

b) Dividend per share is determined by dividing the dividend proposed for the year of

RO 8,271,818 (2004 – 6,948,326) by the number of ordinary shares at the balance sheet date of 33,087,271 (2004 – 33,087,271).

24 TERM LOANS

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Term loan 1 1,800,000 1,800,000 2,100,000Term loan 2 -- -- 577,650Term loan 3 566,291 -- --Term loan 4 414,000 -- -- -------------- -------------- -------------- 2,780,291 1,800,000 2,677,650Repayments due within one year included under current liabilities

(589,586)

(300,000)

(877,650)

-------------- -------------- ---------------Disclosed as non current liability 2,190,705 1,500,000 1,800,000

======== ======== ======== The following further notes apply:

a) Term loan 1 is from the Government of Oman and is interest free. The loan is secured by a

first mortgage over the assets of the Company and the assignment of the insurance policy over plant and machinery as a first beneficiary and is being repaid in annual instalments of RO 300,000 which commenced in December 2002.

b) The Term loan 2 was fully repaid during the current year.

c) Term loan 3 is from a local commercial bank and is subject to interest at 8.5% per annum

(2004 – 8.5% per annum). The loan is secured by a registered mortgage of the subsidiary Company’s property, plant and equipment. The loan is repayable in 24 quarterly instalments of RO 40,450 which commenced from August 2003.

d) Term loan 4 is from the Government of Sultanate of Oman and is subject to 3% interest per

annum (2004 – 3% per annum). The loan is secured by a registered first mortgage of the subsidiary Company’s property, plant and equipment and is repayable in seven annual installments of RO 59,143 which commenced from October 2005. At the balance sheet date the subsidiary Company had defaulted in the repayment of RO 59,143.


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 24 TERM LOANS (Continued)

e) The total value attributable to the Government term loans 1 and 4 includes their carrying value

as determined in accordance with the method described in note 3 o) to the financial statements of RO 1,475,197 (2004 – RO1,674,714) plus RO 324,803 (2004 – RO 425,286) being the amount of unamortised deferred income.

f) The maturity profile of the non-current portion of term loans based on the remaining period to

maturity from the balance sheet date is as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Between 1 and 2 years 520,943 300,000 300,000Between 2 and 5 years 1,310,620 900,000 900,000More than 5 years 359,142 300,000 600,000 -------------- -------------- -------------- 2,190,705 1,500,000 1,800,000 ======== ======== ========

g) The exposure of the borrowings of the Company to interest rate changes is as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Total borrowings 2,780,291 1,800,000 2,677,650Less: Government soft loan (2,214,000) (1,800,000) (2,100,000) ---------------- ---------------- ---------------- 566,291 -- 577,650 ========= ========= =========

25 ACCOUNTS AND OTHER PAYABLES

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO

Accounts payable 2,928,199 2,842,676 2,300,211Due to associates 56,498 56,498 4Employee benefits 203,971 203,971 431,893Interest payable on long term loans -- -- 2,923Overhead accruals 614,536 493,665 138,442Advances from customers 326,060 326,060 279,627Sales discount payable 317,991 317,991 146,993Provision for goods received 43,408 37,273 27,936Proposed Directors’ remuneration (see note below) 88,000 88,000 77,500Payable against corporate guarantee -- -- 391,250 -------------- -------------- -------------- 4,578,663 4,366,134 3,796,779 ======== ======== ========


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 25 ACCOUNTS AND OTHER PAYABLES (Continued)

The following further note applies: The Directors’ remuneration proposed by the Board of Directors is subject to the Annual General Meeting’s approval.

26 CASH GENERATED FROM OPERATIONS

Group 2005

Parent Company 2005

Parent Company2004

RO RO RO Profit for the year before taxation 20,517,015 20,609,377 14,930,913Adjustments for: Depreciation 3,517,611 3,463,706 3,356,806 Provision for stores, spares and consumables (86,547) (86,547) 512,589 Proposed directors’ remuneration 88,000 88,000 77,500Interest income and commission (1,179,848) (1,179,848) (922,175)Interest expense 18,535 18,535 38,852 Amortisation of bond premium (1,392) (1,392) 6,687 Dividend income (459,555) (459,555) (460,551)Gain on disposal of plant and equipment -- -- (4,206)Employees’ end of service benefits 82,772 82,772 89,574 Share of results of associate companies 281,649 281,649 146,652Impairment loss in a subsidiary -- 126,572 --Provision for corporate guarantee (391,250) (391,250) 391,250 Gain on disposal of investment (5,500) (5,500) -- ---------------- ---------------- ----------------Operating profit before working capital changes 22,381,490 22,546,519 18,163,891Working capital changes: Inventories (907,182) (841,482) (1,355,348)Accounts receivable (1,204,330) (1,255,433) (1,157,457)Other receivables (52,310) (52,310) (135,816)Accounts payable 391,708 477,447 692,860 Other payables 393,040 393,040 (2,661) ---------------- ---------------- ----------------Cash generated from operations 21,002,416 21,267,781 16,205,469 ========= ========= =========

27 NET ASSETS PER SHARE

Net assets per share is calculated by dividing the net assets attributable to the Group / Parent at the balance sheet date by the weighted average number of shares outstanding as follows:

Group 2005

Parent Company

2005

Parent Company

2004 RO RO RO Net assets 93,052,381 93,052,381 78,122,297 ========= ========= =========Weighted average number of shares in issue during the year

33,087,271

33,087,271

33,087,271

========= ========= =========Net assets per share 2.812 2.812 2.361 ========= ========= =========


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 28 RELATED PARTY TRANSACTIONS

The Group has entered into transactions with Directors and entities in which certain Directors of the Group have an interest. In the ordinary course of business, the Company sells goods to related parties and procures goods and services from related parties. These transactions are entered into on terms and conditions, which the Directors believe could be obtained on an arms’ length basis from independent third parties.

During the year the related party transactions were as follows:

Group2005

Parent Company

2005

Parent Company

2004 RO RO ROSales Sohar Praton Concrete Products Company SAOC -- 22,963 22,112 ======= ====== ======Purchase of goods: Sohar Praton Concrete Products Company SAOC -- 39,767 19,309 -------------- -------------- --------------Associate: Oman Frantschach Industrial Packaging LLC 807,617 807,617 -- -------------- -------------- -------------Entities related to Directors: Computer Stationery Industry SAOG 2,108 2,108 2,507Oman printers and Stationeries LLC 1,165 1,165 2,785Mohammed and Ahmed Al Khonji LLC 3,779 3,779 7,512 -------------- ------------- ------------- 7,052 7,052 12,804 -------------- ------------- ------------- 814,669 854,436 32,113 ======== ======= ======= The key management personnel compensation for the year comprises:

Group2005

Parent Company

2005

Parent Company

2004 RO RO RO

Short term employment benefits 239,849 239,849 184,018End of service benefits 12,392 12,392 10,427Directors’ meeting attendance fees [see note below]

17,370

17,370

19,320

Directors’ remuneration [see note below] 88,000 88,000 77,500 ------------- ------------- ------------- 357,611 357,611 291,265 ======= ======= =======

The Directors’ remuneration and meeting attendance fees are subject to shareholders’ approval at the annual general meeting and Directors’ remuneration is included under other payables (note 25). The amounts due from a subsidiary and due to associate companies are on normal terms of credit and consideration to be settled in cash. There have been no guarantees given in respect of amounts due to associate companies. The amounts due to related parties are on normal terms of credit and consideration to be settled in cash.


NOTES FORMING PART OF THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 28 RELATED PARTY TRANSACTIONS (Continued)

Group2005

Parent Company

2005

Parent Company

2004 (restated) RO RO ROAmount due from: Associate: Oman Frantschach Industrial Packaging LLC -- -- 631 ====== ====== ===== Subsidiary Sohar Praton Concrete Products Company SAOC -- 13,035 7,747 ====== ====== =====Amount due to: Associate: Oman Frantschach Industrial Packaging LLC 56,488 56,488 --Others 10 10 4 ----------- ----------- --------- 56,498 56,498 4 ====== ====== =====

29 FINANCIAL INSTRUMENTS Financial assets of the Group include investments available for sale, employee loans and long term

receivables, accounts and other receivables, originated loans, long and short term deposits, investments in associates and bank balances and cash. Financial liabilities include accounts and other payables, employees’ end of service benefits, deferred income and term loans.

The Group overall risk management policy focuses on the unpredictability of the financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group constantly reviews the interest rate scenario and uses arbitraging to minimise any potential adverse effects on the financial performance of the Group.

Liquidity risk

There is no significant liquidity risk.

Foreign currency risk

There is no significant foreign currency risk.

Currency risk

a) 71% (2004 – 45%) of the Parent Company’s accounts payable are denominated in foreign currencies (largely US Dollars).

b) 24% (2004 – 16%) of the Parent Company’s bank balances and cash are denominated in

foreign currencies, mainly in United States dollars.

Credit risk There is no significant credit risk as the receivables are covered by bank guarantees and letters of credit.


NOTES FORMING PART OF THE FINANCIAL STATEMENTS (Continued) at 31 December 2005

29 FINANCIAL INSTRUMENTS (Continued)

Interest rates The interest rates and terms of repayment of term loans are disclosed in note 24 to the financial statements. Interest rates on originated loans and long and short term deposits are disclosed in notes 12, 13 and 18 to the financial statements respectively. The interest rates applicable to the bank balances and bank borrowings are in conformity to commercial rates prevailing in the Sultanate of Oman.

30 COMMITMENTS AND CONTINGENCIES

a) At the balance sheet date the value of outstanding letters of credit issued in the normal course of business by the Parent Company amounted to RO 5,628,229 (2004 – RO 326,175).

b) At the balance sheet date there were contingent liabilities in respect of guarantees issued by

the Parent Company’s bankers amounting to RO 20,000 (2004 – RO 213,387). c) At the balance sheet date, the outstanding capital commitment was 6,074,001 (2004 – 38,675),

mainly in relation to the Parent Company’s installation of another grinding mill as part of expansion.

d) The annual lease commitment with respect to the land on which the Parent Company operates

amounts to RO 65,000 (2004 – RO 65,000).

31 SEGMENT ANALYSIS

Classes of business

The Group operates in two business segment of manufacture and sale of cement and concrete products. Cement constitutes 99% of total revenue of the Group and all the relevant information relating to the primary segment is disclosed in the balance sheet, statement of income and notes to the financial statements. Geographical segment The Company mainly operates in the geographical segment of the Sultanate of Oman and other GCC countries; 99% (2004 – 97%) of total sales and resultant debtors are within this geographical segment.

32 COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the presentation adopted in

these financial statements.


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 10 PROPERTY, PLANT AND EQUIPMENT (Continued)

Group

Land and quarry

development

Plant, machinery

and equipment

Factory civil works

Roadways

Housing complex

Earthmoving and

transport equipment

Furniture, fixtures

and equipment

Communi-

cations facilities

Capital work in

progress

Total RO RO RO RO RO RO RO RO RO RO Cost At 31 December 2004 372,424 65,252,279 22,819,720 92,128 7,485,241 597,847 1,712,413 154,361 78,566 98,564,979 Additions during the year -- 7,833 39,178 -- -- 56,685 93,233 -- 530,465 727,394 Transfers during the year -- -- 32,233 -- -- -- -- -- (32,233) -- ------------- ---------------- --------------- ----------- ------------- ------------- -------------- ------------- ----------- --------------- At 31 December 2005 372,424 65,260,112 22,891,131 92,128 7,485,241 654,532 1,805,646 154,361 576,798 99,292,373 ------------- ---------------- --------------- ----------- ------------- ------------- -------------- ------------- ----------- --------------- Depreciation At 31 December 2004 238,774 32,393,768 9,208,393 19,751 6,268,672 518,138 1,493,967 150,422 -- 50,291,885 Charge for the year 29,373 2,578,674 555,228 2,490 299,410 41,416 84,486 1,797 -- 3,592,874 ------------- --------------- --------------- ----------- ------------- ------------- -------------- ------------- ----------- --------------- At 31 December 2005 268,147 34,972,442 9,763,621 22,241 6,568,082 559,554 1,578,453 152,219 -- 53,884,759 ------------- --------------- --------------- ----------- ------------- ------------- -------------- ------------- ----------- --------------- Net book values At 31 December 2005 104,277 30,287,670 13,127,510 69,887 917,159 94,978 227,193 2,142 576,798 45,407,614 ======= ========= ========= ====== ======== ======== ======== ======== ======= =========


NOTES TO THE FINANCIAL STATEMENTS (Continued) at 31 December 2005 10 PROPERTY, PLANT AND EQUIPMENT (Continued)

Parent Company

Land and quarry

development

Plant, machinery

and equipment

Factory civil works

Roadways

Housing complex

Earthmoving and

transport equipment

Furniture, fixtures

and equipment

Communi-

cations facilities

Capital work in

progress

Total RO RO RO RO RO RO RO RO RO RO Cost At 31 December 2004 372,424 63,091,774 22,523,368 92,128 7,485,241 597,847 1,632,403 154,361 78,566 96,028,112 Additions during the year -- 6,500 39,178 -- -- 56,685 93,172 -- 530,465 726,000 Transfers during the year -- -- 32,233 -- -- -- -- -- (32,233) -- ------------- --------------- --------------- ----------- ------------- ------------- ------------- ------------- ----------- --------------- At 31 December 2005 372,424 63,098,274 22,594,779 92,128 7,485,241 654,532 1,725,575 154,361 576,798 96,754,112 ------------- ---------------- --------------- ----------- ------------- ------------- -------------- ------------- ----------- --------------- Depreciation At 31 December 2004 238,774 32,133,624 9,200,536 19,751 6,268,672 518,138 1,440,864 150,422 -- 49,970,781 Charge for the year 29,373 2,469,465 547,819 2,490 299,410 41,416 71,936 1,797 -- 3,463,706 ------------- --------------- --------------- ----------- ------------- ------------- -------------- ------------- ----------- --------------- At 31 December 2005 268,147 34,603,089 9,748,355 22,241 6,568,082 559,554 1,512,800 152,219 -- 53,434,487 ------------- --------------- --------------- ----------- ------------- ------------- -------------- ------------- ----------- --------------- Net book values At 31 December 2005 104,277 28,495,185 12,846,424 69,887 917,159 94,978 212,775 2,142 576,798 43,319,625 ======= ========= ========= ====== ======== ======== ======== ======== ====== ========= At 31 December 2004 133,651 30,958,150 13,322,832 72,378 1,216,569 79,708 191,540 3,940 78,566 46,057,334 ======= ========= ========= ====== ======== ======== ======== ======== ====== =========

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